Analysis Interpretation of the news based on evidence, including data, as well as anticipating how events might unfold based on past events

Here’s how we know sanctions against Russia are working

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A man steps on a portrait of Russian President Vladimir Putin during an opposition rally in Moscow on July 29. (Pavel Golovkin/AP)

By Maria Snegovaya

August 6, 2018

Last week, a bipartisan group of senators introduced a bill that would extend sanctions on Russia in retaliation for interference in U.S. elections, despite Trump’s reluctance.

Would such sanctions matter? Some observers argue that sanctions on Russia don’t work. However, in a recent report for the Center for European Policy Analysis, I found that the existing sanctions have increasingly undermined the Kremlin’s ability to distribute wealth among its supporters in exchange for political support.

Putin’s regime combines the institutions of electoral democracy with informal patron-client relationships and networks. The leadership wins the loyalty of support groups by distributing perks. Elites get affluent positions in business and government. Important political constituencies — such as security officers, bureaucrats and public-sector employees — get good pensions, budgets, salaries and one-off payments. Such neopatrimonial systems are quite vulnerable to economic stagnation. If the economy struggles, the government has fewer funds to distribute among its supporters. The existing sanctions on Russia are contributing to such a dynamic.

Here’s how it works.

1. The sanctions are hurting the Russian economy at large

First, the current sanctions are contributing to the shrinking of Russia’s overall economic pie, thus forcing the regime to make unpopular decisions. By the end of 2017, Russia’s gross domestic product was 1.8 percentage points lower because of the cumulative effect of sanctions on capital inflows than it would have been in a hypothetical scenario without sanctions, Ilya Prilepskiy of the Economic Expert Group explained in an email to me last month. Russia’s Higher School of Economics issued a report suggesting that the most recent round of sanctions, issued in April, would worsen the situation.

All this means that the sanctions hinder the Kremlin’s ability to re-boost the economic growth.

2. A smaller economic pie means less government largesse to distribute to supporters

As the economic pie shrinks, the government can’t keep redistributing perks of the same size to its most important constituencies — and in return, their support for the regime is weakening.

Over the past months, Levada Center polls show that Russians have increasingly negative assessments of both their own personal financial situations and of the nation’s economic situation. Concerned about the long-term sustainability of Russia’s budget, the Kremlin recently announced increases in the value-added tax (VAT) and in the retirement age.

The increase in the retirement age hurts the people in one of Putin’s key constituencies: people of pre-retirement age, one of Russia’s most conservative social groups. The announcement of the increased retirement age has already led to social protests in Russia and a dramatic decline in Putin’s approval rating, the first such drop since Russia invaded and annexed Crimea.

3. Elites fight one another for a share of that smaller pie

Further, the sanctions have intensified the elite struggle for state goodies. In regimes such as Russia’s, elites do not fracture over ideological issues; they take sides on pragmatic grounds in struggles over spoils. They are more likely to split when there are fewer spoils to go around.

In this case, the split is between the Russian elites who profit from Western money and those who make money domestically. Those who are particularly hurt by sanctions that limit their ability to make money abroad are increasingly dissatisfied with Kremlin policies, lobbying to get the Kremlin to improve its relationship with the West and for the West to lift the sanctions.

But the elites who make money domestically are using sanctions as a pretext to lobby for more-attractive state-sponsored projects and contracts as a fee for their loyalty, and for counter-sanctions that would put them in an even better position to profit at home. Anti-Western rhetoric in Russia often itself becomes a lobbying tool. Some elites frame their own projects in “patriotic” — anti-Western — sentiments to encourage Kremlin policies that help them economically.

Meanwhile, as the elites struggle for access to the spoils, they are turning on each other. For example, since 2014, the regional heads of Federal Penitentiary Service and the Ministry of Internal Affairs — previously untouchable — have been detained. And since 2016, heads of investigative departments of Russia’s Investigative Committee have been detained, as well.

This suggests that different parts of the security forces are trying to arrest their competitors in a scramble for the spoils.

It’s possible that this struggle between elites with Western and domestic revenue sources of revenue could result in a decrease in elite insiders with access to state offices and the associated spoils. Research by Michael Bratton and Nicolas Van de Walle suggests that, eventually, former elites left out of the patronage system may join the opposition to the incumbent regime.

4. With fewer carrots to distribute, more sticks are used

The shrinking pie contributes to increased repression. Without resources to co-opt all the elites, the regime must threaten and repress those whose loyalty might waver. Indeed, the number of detentions of members of regional and municipal elites increased about threefold in 2013 over 2012; since then, the regime has arrested about 600 such people each year.

Because the repressiveness of Russia’s regime is growing in parallel to rising elite dissatisfaction, this discontent has yet to spill out.

The Kremlin changes its approach

Here’s what the sanctions have done: Short of spoils to redistribute, the Kremlin is forced to pass unpopular social measures and must coerce the elites to ensure their loyalty. That hurts the regime’s stability.

That may be why, after the April 6 round of sanctions, observers noticed a sudden change in the vocabulary of the Kremlin officials. In the past, Kremlin officials have argued that the sanctions did not bother them much. But in April, officials stopped attacking the West quite so aggressively, attempting a new and more congenial approach. They’ve even started describing sanctions as being “harmful to everybody,” expressing hopes that they will gradually be removed. This suggests that the Kremlin understands that sanctions unsettle Russia’s redistribution-based system, making it hard to sustain. This might soon translate into the Kremlin’s willingness to take a more cooperative stance on some foreign policy issues.

Note: This post has been updated to clarify that Russia’s GDP had not declined; it was simply lower than it would have been without sanctions.

Maria Snegovaya is a PhD candidate at Columbia University, an adjunct fellow at the Center for European Policy Analysis and the Free Russia Foundation, and a research associate at the Center for International and Security Studies at the University of Maryland.